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August 11, 2025

In today’s housing market, where high interest rates are making monthly payments more expensive and sidelining buyers across the country, military families may find a unique opportunity hiding in plain sight: the assumable mortgage.

While not a new concept, assumable mortgages are getting fresh attention as mortgage rates hover near two-decade highs. For military homebuyers navigating frequent moves, tight budgets and complex timelines, understanding how assumable mortgages work could open the door to more affordable homeownership and give sellers an edge with some buyers.

Related: Understanding BAH: More Than Just a Housing Allowance

 

What Is an Assumable Mortgage?

An assumable mortgage is a home loan that a buyer can take over or "assume" from the current owner, most often with the same interest rate, monthly payment and remaining loan balance.

Instead of applying for a brand-new mortgage at today’s higher interest rates, the buyer essentially steps into the seller’s shoes and continues paying off the existing loan under its original terms. This is particularly valuable when the original loan has a lower interest rate than what’s currently available.

For example, imagine a military family buying a home in 2021 with a 2.75% fixed-rate VA Home Loan. Now, in 2025, they are moving due to PCS orders and listing their home for sale. Interest rates are hovering around 6.75%. A potential buyer, such as another military family relocating to the area, could assume the seller’s mortgage, locking in that 2.75% rate and saving hundreds of dollars per month.

Not all mortgages are assumable, but VA, FHA, and USDA loans generally are, provided the buyer meets the necessary eligibility requirements and gets approval from the loan servicer.

Related: 3 Tips for Buying in a High-Interest Rate Market

 

How Assumable Mortgages Work

The assumption process isn’t as simple as handing over the keys and signing a few papers. It requires formal approval from the mortgage servicer, a credit check, and in most cases, legal documentation to finalize the transaction.

When a buyer assumes a mortgage, they take responsibility for the existing loan balance and agree to make payments under the original terms. However, if the home has appreciated since the loan originated (and in many markets, that’s very likely), the buyer would also need to cover the difference between the remaining loan balance and the home’s purchase price at today’s appraised value. This is typically done through a cash payment to the seller, often referred to as an equity buyout.

For example, suppose a seller has a VA Home Loan with a $220,000 balance, but the home is now worth $300,000. The buyer would assume the $220,000 loan and would need to come up with the $80,000 difference, either in cash or by obtaining a secondary loan. This is a critical piece of the equation, especially for military buyers who may not have large sums of liquid cash available.

Fortunately, some lenders will allow a second mortgage or personal loan to bridge that equity gap, although terms and availability vary. It’s also worth noting that the assumption process can take several weeks, sometimes longer than a traditional mortgage closing, so military buyers on tight PCS timelines should plan accordingly.

Related: 5 Things to Know About VA Home Loans for 2025

 

Why Assumable Mortgages Matter in Today’s Market

Mortgage rates have risen significantly over the past few years, pushing many potential homebuyers out of the market due to affordability concerns. Higher rates increase monthly payments and reduce buying power, often forcing military families to compromise on location, size or condition of a home.

That’s where assumable mortgages offer a powerful advantage.

Assuming a lower-rate mortgage can significantly reduce a buyer’s monthly payment. For a $300,000 home, the difference between a 2.75% loan and a 6.75% loan could amount to more than $700 monthly in savings. Over the life of a 30-year mortgage, that adds up to more than $250,000.

These savings are especially meaningful for servicemembers and Veterans who may be managing tight housing allowances, childcare expenses or preparing for upcoming transitions. Lower monthly payments also improve financial resilience and may reduce the risk of future delinquencies.

At the same time, sellers with low-rate mortgages are in a strong position to attract buyers. In a cooling market, offering an assumable loan can make a home stand out, even if it’s priced slightly above comparable listings. Sellers may receive stronger offers or avoid the need for price cuts or concessions. For military families on the selling side of a PCS move, that’s a big benefit.

 

VA Home Loans: A Special Case for Military Buyers

VA Home Loans are one of the most common types of assumable mortgages, and for good reason. They are designed specifically for servicemembers, Veterans, and eligible surviving spouses, offering benefits like no down payment, no private mortgage insurance (PMI), and competitive rates, although a VA funding fee may be required.

When it comes to assuming a VA Home Loan, the buyer does not need to meet the criteria for a VA Home Loan. However, if the buyer is not VA-eligible, the seller’s entitlement (the portion of their VA benefit used to secure the loan) remains tied up in the property until the loan is fully repaid. This can limit the seller’s ability to use their VA benefit again until the assumed mortgage is satisfied.

If the buyer is a VA-eligible borrower and assumes the loan, the seller’s entitlement can be restored, giving them full access to their VA Home Loan benefit. For this reason, many VA sellers prefer to transfer their loan to another eligible Veteran or servicemember.

It’s also important to ensure the lender releases the seller from future liability. Otherwise, if the buyer defaults, the seller could still be held financially responsible. A formal release of liability should always be part of the assumption agreement.

Related: Is Paying Points on Your Mortgage Worth It? Smart Savings for Military Families.

 

Is an Assumable Mortgage Right for You?

For military homebuyers, an assumable mortgage can be a game-changing financial tool. It offers lower payments, better affordability and a smoother transition in a high-rate housing market. 

But it’s not a one-size-fits-all solution.

Buyers need to evaluate whether they can afford the equity buyout, whether the assumed loan balance matches their needs, and whether the assumption process fits their timeline. An AAFMAA Mortgage Services LLC (AMS) Military Mortgage Advisor, a licensed mortgage loan originator, can run these numbers for you. Sellers should understand the implications of tying up their VA entitlement and the importance of getting a formal release of liability.

 

We’re Here to Help

Whether you’re thinking about buying, ready to start home-shopping in earnest, or considering a refinance, an AMS Military Mortgage Advisor will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of affordable mortgages designed to meet your needs.

 

Ensuring Armed Forces Mutual Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today or give us a call at 844-422-3622!